Euro, yen swap spreads stabilize, show less demand for U.S. dollars
Reuters
Published Apr 02, 2020 12:31PM ET
Updated Apr 02, 2020 12:55PM ET
By Gertrude Chavez-Dreyfuss
NEW YORK (Reuters) - The cost of raising U.S. dollar funds in the yen and euro swaps market stabilized on Thursday, with premiums favoring the other two currencies suggesting that demand for the greenback had receded from earlier in the coronavirus pandemic.
Currency spreads in yen and euro swaps, the two most liquid markets, widened sharply last month as foreign banks and companies scrambled for dollar funding.
A slew of measures from the Federal Reserve last month to ensure there was no global dollar shortage alleviated some funding pressure.
Cross currency swaps and FX swaps allow investors to raise funds in a particular currency from other funding currencies. For example, an institution with dollar funding needs can raise euros in euro funding markets and convert the proceeds into dollar funding obligations via an FX swap.
On Thursday, euro/dollar three-month swaps widened considerably in favor of the euro to nearly 59 basis points
The yen/dollar three-month swaps also widened in favor of the yen to nearly 19 basis points
"With all the actions that the Fed has taken, the most recent one being the creation of a standing repo facility for foreign central banks, all this unprecedented action has created a glut of dollars now," said Erik Bregar, head of FX strategy at Exchange Bank of Canada in Toronto.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.